Australian bonds rally on European crisis

Australian 10-year government bonds extended gains as drops in German notes boosted concern that debt crisis may hit also region's biggest economy. Australian 3-year yield declined by 83 bp reaching 3.05%, the biggest drop since 2008 while 10-year borrowing rate plunged to 3.806%.  Matthew Johnson, UBS AG's strategist in Sydney said, investors are interested in diversifying their investments amid European uncertainty and Australian bonds are good option.